Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AFM Exams › Interest rate option.
- This topic has 7 replies, 2 voices, and was last updated 8 years ago by John Moffat.
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- March 8, 2016 at 11:17 am #304322
I an unable to identify the today future price which then can be use to estimate the price on transaction date date (12 June), and so ultimately profit is calculated
Question
abc wish to borrow £4m in june for 9 month, & wishes to protect itself against rates rising above 6.75%. It is 11 may & sport rate is currently 6%.
From the table premium is 0.14 and contract size is £1m
abc negotiates the loan with the bank on 12-june(when the £4m loan rate is fixed for the full 9 months) & closes out the hedge.
What will be the outcome of the hedge if price on 12-june have moved to 7.4%?
i correctly calculated the no of contracts and premium amount.
No of contract 12
Premium £4200March 8, 2016 at 11:48 am #304337I cannot really help you without seeing the complete question.
If it is a past exam question or is from the BPP Revision Kit, then tell me the name of the question and I will find it.
March 8, 2016 at 5:03 pm #304437Sir it is the Example of BBP, Panda is name of question, given in the Interest Rate Options heading.
If your book is from 1-Sept 2015 to 31-Aug-2016 then is on Page no is 477.March 9, 2016 at 6:45 am #304620I am really sorry but I think you must be referring to the Study Text, and I do not have the BPP Study Text.
I cannot find a question called Panda anywhere in the Revision Kit (and certainly not on page 477).
March 9, 2016 at 7:31 am #304636Yes i was talking about study text.
Is there any way i can post the image of the question?March 9, 2016 at 7:45 am #304645I am sorry but know.
However, I do suggest that you spend your time on past exam questions (either from the ACCA website or from your Revision Kit), rather than from the Study Text.
The past questions are far more important in terms of the level of difficulty, and the style, and (because the answers are those given by the examiner) they are usually more certain to be correct 🙂March 9, 2016 at 10:48 am #304702THANK YOU for your valuable suggestion. 🙂
March 9, 2016 at 11:02 am #304704You are welcome (and sorry i could not help with your original question).
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